BARRON'S 2016 Markets That Matter Most

Argentina: Light at the End of a Long, Dark Tunnel?

“…The BRICs top our list, but we also consider Saudi Arabia, Turkey, and Argentina for 2016…”

Argentina: Light at the End of a Long, Dark Tunnel?

Need to know: After at least 12 years characterized by an unorthodox economic policy that isolated Argentina from global financial markets, a new administration following the October 2015 elections brings the hope of a major shift in course and potentially new investment opportunities in the coming years. During the Nestor and Christina Kirchner administrations, a populist framework created numerous obstacles for the local economy and for international investors: below-potential growth in the low single digits, inflation in the 30% range, a politically charged central bank, a bifurcated currency regime with multiple rates, another default on international debt, and litigation with “hold-out” creditors, which has made it impossible for Argentina to access, fully, international markets.

What to watch: Mauricio Macri, the former chief of government of Buenos Aires and the new president, campaigned as a centrist with a return to economic orthodoxy as a key tenet of his platform. He has indicated that a deal with “hold-out” creditors is possible in 2016, a development that would reopen Argentina’s debt markets and signal a more general opening of Argentina for international investors.

Why it matters: It is early to declare a sea change for Argentina due to poor near-term economic prospects and the difficulty of radically changing policies that were so long in the making and for which there is still ample support in congress. However, given Argentina’s plentiful natural resources, high yields, and potentially attractive corporate and sovereign valuations, we expect it to be a market to watch in 2016 and beyond for investment opportunities across its markets.